On the heels of a significant rally in the dollar after the release of the U.S. Jobs Report, today one of the legends in the business covers everything from Hindenburg Omens to Draghi and also includes a guest commentary about what has just transpired in Europe.
By Art Cashin Director of Floor Operations at UBS
December 5 (King World News) – “On this day (+1), (which would be December 6th if you have a graduate degree), in about 705 A.D., the Nordic tribes of Europe, recently converted to Christianity, began to adopt a theologically un-definable affection to an Archbishop who had existed three centuries before in an area east of Greece. Legend says he was as wise as they come. And, certainly he was devout.
But was that enough to make him a big hit? He did have the added benefits of being the designated patron saint of scholars (ain't we all); merchants (a popular Nordic pastime); sailors (the other Viking pastime) and children. He had gained the latter role through the legend that he had saved three dowry-less young girls by dropping jewels into their home through an open window.
So, over the next thousand years, these Nordic tribes would recall his love of children and his generosity by giving gifts to their children and the poor on St. Nick's feast day – December 6th. When the Dutch came to America, they brought their gift-giving "Sinte Klaus" with them. America moved the day to Christmas and mispronounced his name to Santa Claus.
Of course, by this time Nordic and American winters had made open windows rather impractical in December. So the chimney became the logical point of entry. And, since cold floors tended to make you reach for your stockings (hung to dry by the fire), they became the logical place to hide the jewels (gifts).
To prepare for the feast of good old St. Nick go to the Rooftop Inn and sip enough well-laced eggnog to make your nose look like Rudolph's. But don't get out of line or they'll put coal in your stocking.
Yesterday, traders looked more like they were smoking their socks than hanging them from the mantel. Mario Draghi threw markets a curve ball and stocks in the U.S. spent most of Thursday trying to decide what it really meant.
Market Seesaws In Front Of Payrolls – U.S. stock futures looked for an upbeat opening early Thursday morning. Then along came Mario Draghi.
Mr. Draghi of "whatever it takes" fame came to the party with an empty bag. Again he tried to jawbone the markets with promises of future action.
Markets were disappointed. Stocks in Europe headed south quickly and the Euro spiked higher. U.S. futures reversed to the downside and rather quickly at that.
U.S. stocks opened lower and then moved sideways for about an hour.
Then stocks rolled over and headed south again.
In late morning, I sent this assessment to some friends:
Brent dip below $70 led to CVX and XOM pulling more than thirty points out of Dow (now 23 points). Christmas consumer motto appears to be: “If it's got a battery – buy it.” Apparel sales lag badly, dragging heavily on many retailers.
Draghi remains the Prince of Promise – talk not action.
Bears push Hindenburg Omen but it has expired already.
Run rate shortly but slower than Wednesday.
In late morning, there was a Bloomberg story about Draghi and the ECB that caused stocks to rethink things and they began to trim the losses.
Some traders thought the article might be a little misleading. Here's an email that my friend Peter Boockvar, over at the Lindsey Group sent out at the time.
Bloomberg is reporting as new news that the “ECB Governing Council expects to consider proposal for broad based asset program (just bonds, not stocks) including sovereign debt next month, two euro area central bank officials familiar with deliberations said.” Anyone listening to Draghi this morning knows this is nothing new and Bloomberg repeated what Draghi said, “package hasn’t been designed yet; no decision on implementation taken yet…Composition of package may be influenced by incoming data.” The euro is still up but came off its highs in response. While the Bloomberg headline made this out to be breaking news, it is nothing new as we know the ECB is looking at all things to increase the size of their balance sheet and Draghi said as such today. The question is if, timing, extent and how much support on the council does Draghi get because it won’t come from the Germans.
The markets, however, continued to “buy in” to the upbeat possibilities of the Bloomberg headline for another half hour. (Most folks can't analyze complex things at the lightning speed that Peter does.)
Stocks made it into mild plus territory around 12:30. The air seemed a bit rare up there and the Dow snaked around the unchanged line for the next two hours. Around the 12:30 top, I sent this follow-up:
Buy the dippers nibble away – – helping to trim the losses.
Run rate at 12:30 projects to an NYSE final volume of 650/730 million shares.
(The final volume swelled to 785 million shares on a late zigzag in the final hour.)
Just before the final hour began, traders were circulating a WSJ wire story by Jon Hilsenrath that suggested that some new Fed simulations indicated that the Fed should begin its tightening almost immediately. That seemed to spark a flurry of bid cancellations and stock prices began to slip.
The late pullback then collided with a bullish read on the market on close orders. It looked like there might be a billion dollars to buy on balance. Prices began to move back up to the levels they were at before the Fed article began to circulate.
The odd part of the late rally was that it may have been based on a false premise.
The computers took note of the appearance of large buy orders in some high-priced stocks. Thus, they projected about a billion dollars to buy on balance.
But, a little leg work from the two-legged crowd indicated there were sufficient sellers lurking just above the last sale in those stocks. That suggested that the on-close buying was basically “paired off”, causing little change in price.
Gee, maybe there's still a need for human assessment and analysis. Good deal!
Non-Farm Payrolls – NFP Day has an historic upward bias. Not overwhelming but upward nonetheless. Also there is buzz about that last month's number – non-seasonally adjusted, may have been over 350,000. Whisper number for today is around 250K or 275K.
Consensus – Payrolls and wages likely to set the tone. Stick with the drill – stay wary, alert and very, very nimble. Have an absolutely wonderful weekend!
IMPORTANT – KWN has many more interviews being released today.
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